As residential building recovers from a near standstill after the housing crisis, much of the momentum is coming not from subdivisions with green lawns and two-car garages but from rental apartments. Multifamily construction nationwide is two-thirds of the way back to its prerecession peak, while single-family home construction is still only about a third of the way back to its peak, said David Crowe, the chief economist of the National Association of Home Builders.
The multifamily construction recovery, fueled by young people who are striking out on their own, is strongest in the South and West, particularly in markets where job growth is picking up. Last month, the Commerce Department released data on new construction that showed new apartment complexes were going up at the fastest rate since July 2008.
That has led to a fear of overbuilding. While rents are still rising, analysts say the steep increases between 2011 and 2012 are unlikely to be repeated as a surge of units are completed in the latter part of this year and will continue to come on the market early next year. Nationally, residential rents rose 4.2 percent in 2011, but only 3.6 percent so far this year, according to Axiometrics, a Dallas-based apartment market research firm.
Much depends on the fortunes of the job market, which industry analysts said would determine whether higher rents were sustainable.
“The real test is going to be what happens between now and April or May as we see all these new units introduced to the market,” said Jay Denton, the vice president for research at Axiometrics.
Still, vacancies remain extremely low and the pace of building in recent years has not been quick enough to replace obsolete, decrepit or demolished units, said Mr. Crowe of the homebuilders group. He projected that it would be several years before supply was back to normal.
In Houston, from January to September, construction permits for multifamily housing increased by more than 70 percent over the same period a year earlier, according to data compiled by the homebuilders group. Permits for single-family homes, by contrast, increased by 25 percent. Shares of Camden Property, the real estate investment trust that is building Camden City Centre, were up about 20 percent over a year ago.
“The demand for building is all over the country, really,” said Ric Campo, Camden’s chairman and chief executive. “We’re seeing higher rents, faster lease-ups, lower construction costs — everything you want to see. Part of it is there’s just a pent-up demand for new product because we didn’t build anything during the downturn.”
In Houston, where low housing prices have traditionally kept the cost of living down, Camden can rent a one-bedroom apartment for $1,450.
Houston is far from the only market where demand for rentals is at a fever pitch. Denver, Oakland, Seattle, Miami and Charlotte, N.C., where many of the condo projects that went bust have been converted to rentals, also appear at the top of lists by data collectors like Trulia, Zillow and Axiometrics.
The bulk of the apartments are not going to families who lost their homes to foreclosure, many of whom are renting single-family houses. Instead, the apartments are being rented by young people who had moved in with their parents during the recession, or simply had not yet moved out.
People in their early 30s, the age when many might look to buy a first home, are renting for longer periods of time, partly because mortgages are difficult to come by and partly because they have been unnerved by the turmoil in the housing market.
“That portion of the population is starting to grow again, but I think a lot of them, seeing what has happened, are not particularly enthralled with the idea of going out and buying a house,” said Steve Blitz, the chief economist at ITG Investment Research.
Michael Hoffman, a 26-year-old electrical engineer, said he moved into a two-bedroom apartment in Camden City Centre a few months ago after living with his parents to save money.
“It was easier,” he said of the rent-free arrangement with his parents. “But I felt like I was missing out on my 20s.”
Daniel Cadis contributed reporting from Houston.
Article source: http://www.nytimes.com/2012/12/07/business/developers-of-new-housing-aim-for-renters-not-buyers.html?partner=rss&emc=rss